Washington, D.C. – The Consumer Financial Protection Bureau (CFPB)
today filed a complaint in federal district court against Access Funding, LLC
for an illegal scheme in which victims of lead-paint poisoning and others were
deceived into signing away future settlement payments in exchange for a
significantly lower lump-sum payout. The CFPB alleges that Access Funding
steered victims to receive “independent advice” from a sham advisor, an
attorney who was actually paid directly by the company and indicated to
consumers that the transactions required little scrutiny. In its suit, the CFPB
seeks to put an end to the company’s unlawful practices, obtain relief for the
harmed consumers, and impose penalties.

“Many of these struggling
consumers were victimized first by toxic lead, and second by a company that saw
them as little more than income streams to be courted and harvested,” said CFPB
Director Richard Cordray. “The Consumer Bureau is fighting to help vulnerable
consumers who were swindled out of their settlements, and to prevent future
abuses.”

Access Funding is a
structured-settlement-factoring company based in Chevy Chase, Md., that
operated nationwide. The CFPB’s lawsuit names Access Funding and a successor
company, Reliance Funding. The lawsuit also names four individuals: Michael
Borkowski, CEO of Access Funding; Raffi Boghosian, Chief Operating Officer of
Access Funding; Lee Jundanian, CEO of Access Funding from February 2013 to May
2014; and Charles Smith, a Maryland-based attorney who purportedly provided
advice for almost all Maryland consumers who did business with Access Funding.

Structured settlements
establish periodic payments of damages for personal injury, often to ensure the
well-being of individuals who have suffered long-term physical or cognitive
harm. Structured-settlement companies purchase payment streams from settlement
recipients in exchange for an immediate lump sum that is usually significantly
lower than the long-term payout. Forty-nine states have enacted
structured-settlement-protection laws that, among other things, require court
approval for the transfer of a settlement. Many states, including Maryland,
require that a consumer have consulted with an independent professional advisor
before the court will approve a sale.

The CFPB alleges that Access
Funding was aware that many of the consumers it targeted had significant
cognitive impairments from lead poisoning. According to the Environmental
Protection Agency, children six years old and younger are most susceptible to
the effects of lead paint poisoning. Even low levels of lead in the blood of
children can result in harms including behavior and learning problems, lower
IQ, slowed growth, and hearing problems.

Access Funding conducted
approximately 70 percent of its settlement transfers in Maryland; the company
sought court approval for approximately 200 transfers in Maryland from 2013 to
2015, of which at least 158 have been approved. Consumers received a steeply
discounted lump sum in return for signing away their future payment streams.
The lump sums Access Funding provided consumers typically represented only
about 30 percent of the present value of those future payments.

The CFPB’s complaint alleges
that the defendants violated the Dodd-Frank Wall Street Reform and Consumer
Protection Act’s prohibition on unfair, deceptive, and abusive acts and
practices. Specifically, the CFPB alleges the defendants:

Steered consumers to a sham advisor: The
CFPB alleges that Access Funding steered Maryland consumers to a single
attorney, Charles Smith, who purported to act as the “independent professional
advisor” for almost all of its Maryland transactions. The complaint alleges
that Smith represented to consumers that he was providing independent advice,
but in fact he provided virtually no advice to consumers, and was paid directly
by Access Funding.

Exploited consumers’ confusion to keep deals
on track: Access Funding also allegedly offered cash advances to consumers
who were awaiting approval of structured-settlement transfers. The company
falsely represented to those consumers that they were obligated to proceed with
the transactions after receiving the advances, even if the consumer realized it
was not in their best interest. These consumers included many with cognitive
impairments. The CFPB alleges that the advances did not bind consumers to
complete the transactions, and the company and other defendants took advantage
of consumers’ lack of understanding of that fact.

The CFPB’s complaint is not a
finding or ruling that the defendants have actually violated the law.

The Consumer Financial
Protection Bureau is a 21st century agency that helps consumer finance markets
work by making rules more effective, by consistently and fairly enforcing those
rules, and by empowering consumers to take more control over their economic
lives. For more information, visit consumerfinance.gov.